Bank of Thailand governor proposes fiscal suggestions
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Bank of Thailand governor proposes fiscal suggestions

Regulator concerned with stability

Mr Sethaput gives a keynote address at the Bank of Thailand's Digital Finance Conference 2023.
Mr Sethaput gives a keynote address at the Bank of Thailand's Digital Finance Conference 2023.

The government's economic policies should be considered in terms of their medium-term impact amid concerns about fiscal instability, says the head of the Bank of Thailand.

The central bank affirms the local economic recovery is intact, despite GDP growth being lower than expected in the second quarter at 1.8%.

The central bank focuses on three core areas: economic growth, price stability and financial system stability.

Fiscal stability is a key factor in balancing the country's economic sustainability for the long term, central bank governor Sethaput Suthiwartharueput told the prime minister during a discussion on Thursday.

"Fiscal instability could impact our fiscal condition, as happened with the US government, resulting in the recent US debt downgrade," he said.

"The central bank does not determine fiscal policy, we are only giving our opinion."

Mr Sethaput said the suspension of debt repayment is a tool to mitigate debt pressures, but should not be a key instrument to fix the country's borrowing binge.

The scheme should be targeted to specific groups for a specified period, not a blanket policy for all borrowers, which would have major economic side effects.

The Finance Ministry is planning rescue measures by suspending debt repayment for three years for small-scale farmers and small and medium-sized enterprises (SMEs) for loan amounts not exceeding 1 million baht.

The scheme is expected to ease the debt burden for farmers and SMEs who were hampered by the pandemic.

According to the Puey Ungphakorn Institute for Economic Research, the majority of farmers carry heavy debt and are older, unlikely to exit from the debt cycle.

Past Thai governments implemented 14 debt suspension schemes over eight years, but these measures did not solve the problem efficiently, said Mr Sethaput.

Regarding the government's 10,000-baht digital wallet scheme, he said the central bank is waiting for clearer policy statements before assessing the impact of the scheme, though the form of the digital payment will be key.

Private consumption is a key factor contributing to the country's economic growth, with growth posted in the first and second quarters of this year.

Stimulus of private investment would be more beneficial than private consumption as the former has been sluggish for several years, said Mr Sethaput.

"All Thai citizens do not need a 10,000-baht cash handout based on necessity. If the scheme is allocated to a targeted segment, it would be easier on the fiscal budget," he said.

Moreover, the central bank does not support digital assets as a means of payment.

The government's digital wallet scheme is not currently associated with the Central Bank Digital Currency project, for which the regulator has not set a launch date.

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